As someone who works in financial services, I follow the markets – in the West, across Asia and the entire world – closer than most. Since the Bear Stearns collapse in March 2008, through the demise of Lehman Brothers and its ghastly aftermath, much of my professional life has been dominated by the angry flashing of those little lights on a Bloomberg screen.

In recent years, the violent gyrations on financial markets have been deeply discomforting, causing angst among market professionals, like me – but that is the least significant aspect. For those little lights represent, of course, the ebbs and flows of cash which, in turn, determines the fate of real businesses. It is at the sharp end of employment and livelihoods, dispossessed homes and broken families that the human impact of financial turbulence is most keenly felt.

So, yes, I want such turbulence, which will never be fully-eradicated, nor should it be in a free-market system, to now lessen to more manageable levels. Yet the responses of our politicians to recent financial troubles – hiding behind complexity and kicking the can down the road – have not only failed to temper the volatility, but have actually made it much worse.

Last week’s eurozone “agreement”, for all the related fanfare, was a case in point. Far from making the situation clearer, allowing investors to make considered assessments, this latest announcement made Western Europe’s grotesque debt crisis even more acute, sowing further infectious spores of confusion.

The deal itself, unveiled dramatically in the early hours of Thursday, was met with the now obligatory “relief rally”. The FTSE All-World equity index soared 4.1pc, helped by signs of renewed US economic growth. European bank shares spiked no less than 12pc on Thursday, as traders recognised, for all the official obfuscation, the latest dollop of government largesse.

By late Thursday, though, and certainly on Friday, the warning signs were there. Global bond markets, by character more sober and smarter than the excitable equity guys, were voting against the deal. This is alarming. For it is only by selling more bonds that the eurozone’s deeply indebted governments can roll-over their enormous liabilities and keep the show on the road.

Some say Western governments shouldn’t “accept” what the market says. “Who do these trading people think they are,” I hear from the lips of the educated but financially-illiterate political elite. Let’s be clear – if global bond markets stop lending to a number of large Western economies, we are in the realms of unpaid state wages and pensions, transport chaos and closures of schools and hospitals – sparking the prospect of serious civil unrest. Forgive my intemperate tone, but these are the dangers we face. And I’m afraid the only rational response to Thursday’s announcement is that the probability of such undesirable outcomes has just been increased.

European leaders have reached an “agreement”, we were told, with the private holders of Greek debt, who now accept a 50pc write-down on their stakes. This is predicated on an additional €120bn (£105bn) cash-injection by EU member states and the IMF. By paying bond-holders less, and making other savings, the hope is that Greece can cut its sovereign debt from 150pc of GDP to 120pc in the next few years.

This deal was presented as a “victory” by the eurocrats. After all, back in July those nasty private creditors agreed only to a 21pc “haircut” on their Greek debt. The deal is “voluntary”, though, nothing having been decided except the “50pc haircut” headline. In reality, by bargaining hard over coupons and maturities – how much the bonds will pay annually, and for how long – those who so unwisely lent money to Greece (eager to reap high yields, while always expecting a bail-out) will get a much sweeter deal. This is the discussion that will take place, behind closed doors, during the coming months. But that sweeter deal will need to be paid for with yet more sovereign borrowing, by some eurozone government or other, plus further sack-loads of taxpayers’ cash.

It is telling that Greek bond-holders themselves were on Friday reassuring their investors that the reduction in the net present value of their stakes, compared with the “21pc haircut” deal, “will not be overly onerous”. In addition, the July agreement, while also “voluntary”, included a 90pc creditors’ participation. Thursday’s variant cited no such number.

So, the centre-piece of last week’s “package” is far less decisive than meets the eye. It was, in fact, singularly indecisive. The hope that Greece will clean-up its balance sheet autonomously now relies even more on a privatization programme that is already laughably behind schedule. So the moral hazard will go on, making it tougher still for the governments of Portugal, Ireland and the other eurozone “peripheries” to sell to their electorates the virtues of fiscal responsibility. These are not clever-clever academic points. I’m pointing-out, quite simply, what the bond markets will have noticed.

Read the rest here.

October 25, 2011 10:08pm4 Comments

Hell’s Angels graffiti written on the back of a military vehicle in Iraq. / FBI

Gang members have been signing up with the United States Armed Forces, posing a “significant criminal threat” to law enforcement, according to a report by the Federal Bureau of Investigation (FBI).

“Gang infiltration of the military continues to pose a significant criminal threat, as members of at least 53 gangs have been identified on both domestic and international military installations,” the report says, resulting in American gang graffiti in Iraq, among other things.

Every branch of the military contains some gang members, the FBI reported, but most gang members join the Army, the Army Reserves, and the U.S. National Guard. And gang member enlistment doesn’t require a sinister intention. “Many street gang members join the military to escape the gang lifestyle,” says the FBI, while others join at the behest of a court “as an alternative to incarceration.”

But the military sometimes proves a bad environment for gang members, who “often revert back to their gang associations once they encounter other gang members in the military.”

Numerous U.S. gangs, according to the report, “advise members without criminal records to join the military for necessary weapons and combat training.” Military deployments, in the event, end up placing gang members alongside other members of the armed forces on active duty.

Gang membership in the U.S. military has resulted in “incidents of weapons theft and trafficking,” the FBI warns, which “may have a negative impact on public safety or pose a threat to law enforcement officials.”

You can see a list of gangs affiliated with branches of the military below. For reference, OMG stands for “Outlaw Motorcycle Gang.”